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Investing Risk

Investing Strategy

40 Examples of Investing Risk

 , updated on March 02, 2023
Investing risk is the potential for an investment to decline in value. Generally speaking, there is no risk-free way to store wealth. If you hide your money under your mattress, it may decline in value due to inflation or exchange rate volatility. As such, investing is largely concerned with creating new value with capital while managing risk. The following are common examples of investing risk.
Business Cycle Risk
Cycles of growth and decline experienced by industries.
Business Risk
The risk that a business will not perform to target.
Commodity Risk
Commodity price fluctuations and supply disruptions.
Competitive Risk
A business loses market share or experiences pricing pressures due to competition.
Compliance Risk
The risk a business will violate laws, regulations or standards.
Concentration Risk
A lack of diversification.
Contagion Risk
The risk of an economic shock that spreads across countries and industries.
Counterparty Risk
The risk that a counterparty to a transaction will not fulfill their obligation to you.
Country Risk
Investments tied to a particular country that are at risk due to political or economic problems in that country.
Credit Risk
The risk of non-payment by borrowers and customers.
Currency Risk
The potential for exchange rate fluctuations to cause losses.
Economic Risk
The risk of an economic downturn or economic issues such as inflation.
Environmental Risk
Losses and liability related to environmental damage.
Event Risk
Losses tied to a major adverse event such as a pandemic.
Exit Risk
Losses due to difficulties in selling an investment.
Falling Knife
The risk of buying something that has downside momentum – the price may simply continue to drop.
Fraud Risk
Losses due to fraudulent activities such as embezzlement.
Geopolitical Risk
The risk of political or social instability.
Governance Risk
Losses due to poor management and insufficient oversight.
Idiosyncratic Risk
Hard to predict failures of a single business such as a product recall.
Industry Risk
Losses across an industry due to factors such as business cycles, commodity prices and regulations.
Inflation Risk
The risk of a sustained and broad increase in prices.
Inherent Risk
The risk of inaccurate information such as an error or omission in a financial statement.
Interest Rate Risk
Losses or relative underperformance due to changing interest rates.
Investment Horizon Risk
The risk that you will need to use your savings earlier than expected.
Liquidity Risk
The risk that you will run out of cash or be unable to sell investments at a reasonable price due to a lack of demand.
Management Risk
Potential for losses due to mismanagement.
Market Risk
Losses due to market conditions such as prices or low liquidity.
Model Risk
Failure of an investment model.
Operational Risk
Operational failures of a business due to factors such as supply chain issues.
Political Risk
The risk of political instability.
Priced For Perfection
Risks associated with a firm with a high valuation whereby the market expects very high performance from the company.
Regulatory risk
The potential for new regulations that impact your investments.
Risk Of Ruin
The risk of losing all of your capital, often due to leverage.
Short Squeeze
A lack of liquidity to cover all the investors who want to exit short positions at the same time. Potential for major losses.
Systematic risk
Risks to the entire financial system or market such as a major information security attack.
Tax risk
The risk of unexpected taxes.
Upside Risk
A term for greater than expected returns.
Value Trap
An investment with a low price for a good reason that might not be apparent to all investors.
Volatility risk
The risk of price swings.

Investing Risk

This is the complete list of articles we have written about investing risk.
Business Risks
Commodity Risk
Credit Risk
Exchange Rate Risk
Falling Knife
Inflation Risk
Inherent Risk
Investing Risk
Liquidity Risk
Model Risk
Political Risk
Priced For Perfection
Refinancing Risk
Reputational Risk
Risk Of Ruin
Short Squeeze
Unknown Risks
Unsystematic Risk
Upside Risk
Value Trap
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